How CEOs Think Covid Crisis Will Shape Theft
Managing an airline is managing the crisis. And for two of the airline’s longest-serving CEOs, lessons learned after the 2001 terrorist attacks have guided decisions during the current pandemic.
Gary Kelly and Doug Parker, CEOs of Southwest and American Airlines, respectively, have seen their businesses disrupted on several occasions. Each time, they found ways out of the disruption. Mr. Kelly will have been CEO for 18 years when he retires early next year; Mr. Parker will have been CEO of a major airline for 20 years in September.
The two sat down for talks to discuss the toll of multiple crises and what lies ahead for airlines and their customers.
âI found myself going back to the 9/11 experience. I think it gave me as much confidence as anything – I know we’re going to get over this, âsaid Mr. Parker, who had become CEO of America West Airlines days before the 9/11 terrorist attacks. and fought to save this small airline. .
It merged America West into US Airways, then into American to create the world’s largest carrier. He is the only person to have been a CEO of a major US airline for both 9/11 and the pandemic.
The lesson he learned from past crises: âWhat will matter when this passes is the way we have treated our team, the way we have treated our clients. “
For Mr. Parker, that meant reimbursing customers when competitors changed ticket rules, tampered with schedules and illegally refused reimbursements to save money, and not cut employee hours when airlines received funds. federal governments to pay workers.
Customers have had a lot of problems with American operations this summer and in previous years. Many other carriers, including Southwest, have had a difficult restart amid an increase in travel.
For millions of travelers, the complex rush to add more flights has been the key to recovery and reconnection in the event of a pandemic. At the same time, the weak points are significant: delays and cancellations due to bad weather, staff problems and the limited ability to transport customers on public holiday weekends. There has been poor service due to a lack of workers in areas ranging from reservations to wheelchair pushers, and cabin tension with disruptive passengers and uncomfortable masks.
American posted losses of $ 8.9 billion in 2020; Southwest posted losses of $ 3.1 billion last year.
Mr Kelly hopes he has weathered his latest airline crisis: he announced in June that he would retire as CEO early next year, but remain executive chairman until at least 2026.
This could be one of many significant executive departures from the airline industry in the coming months. (Mr Parker has not announced any plans.) There are rumors that several number 1 and 2 airlines could depart within the next year. Some airlines have already seen CFOs and others quit for more lucrative tech assignments.
Mr. Parker notes that severe crises can test even the best executives. âI think there are people who are made for it and others who are not. You will see people join the business and go through something like that, and then say, âThis business is not for me. Those of us who have been through several of them, that’s what we do, âhe says.
Mr Kelly, 66, says restructuring the airline industry with bankruptcies and mergers at other airlines in the aftermath of 9/11 created an opportunity for Southwest he threw himself into when ‘he took over as CEO in 2004.
Southwest has found creative ways to expand its footprint in Chicago and Dallas, allowing for huge expansion and a much stronger road network. Its decision to buy 10 years of low-cost jet fuel helped lower tariffs and fuel one of its fastest growing periods.
The pandemic means a big reset for the airline industry and the opportunity to recreate networks that will change travel for years to come. With hourly trips between major business destinations not required, Southwest had planes to add 18 new destinations during the pandemic. Mr. Kelly says they will stay.
âWe accelerated a lot of points on the map here during the pandemic that could have taken us 20 years before we finally had the planes to add all of these markets,â he says.
Throughout its history, Southwest has taken its greatest strides in times of crisis. âScenarios like this create incredible opportunities,â says Kelly.
Mr Kelly says the pandemic likely delayed his retirement announcement. He wasn’t going to leave during a seizure. But now the company’s finances have stabilized – it was losing $ 20 million a day or more during the worst days of the pandemic – and although it says it has “a lot of gasoline in the tank” , the timing seemed right.
March 2020 has been âthe longest month of my life,â he says. âEvery day was much worse than the day before. And you just couldn’t figure out how it can happen and where is it going to end? “
When he went to his annual checkup, Mr Kelly says he first admitted to his doctor that his stress levels were high.
The airline industry is more difficult to manage than most. There are very high fixed costs – planes are expensive – and very high labor costs with skilled labor and huge safety concerns and responsibilities. Airlines depend on energy prices. They cannot store their products, they are subject to weather conditions on a daily basis and the prices are very competitive.
âAnd we build the product as our customers experience it,â says Kelly.
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On Mr. Kelly’s first day as CEO, âI remember vividly how responsible and dependent I felt on all of our employees. They are the ones who do the real work every day, âhe says. “I’ve never really felt that way before in other jobs.”
American Mr. Parker, 59, says that a big difference between 9/11 and the pandemic is that at the time of the terrorist attacks his industry was in bad shape. The travel slowdown has forced struggling carriers out of business and led to huge consolidation. This resulted in higher fees and numerous complaints from travelers, but a series of profitable years for the remaining airlines.
âThis one, the industry was performing well, certainly compared to our past,â Mr. Parker said. As a result, he doesn’t expect major structural changes in the United States With more than $ 50 billion in government aid, airlines aren’t going to bankruptcy court or shutting down hubs and leaving communities without air service.
But changes will come. Typically, airlines change the structure of their routes by adding a few more planes each year. Now they have the opportunity to remake their networks like never before and increase their efficiency. For the executives who remain, Parker says, the next few years, as turbulent as they are, should be exciting as well.
âI think these are the best times when you come out of tough times,â he says. “They are funny.”
Write to Scott McCartney at [email protected]
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